Explained: Why does IMF give loan to countries like Pakistan which are facing economic crisis?

Explained: Why does IMF give loan to countries like Pakistan which are facing economic crisis?

International Monetary Fund: On the economic front, the condition of Pakistan is very bad. The crisis is even such that experts are anticipating his bankruptcy in three weeks. According to reports, the State Bank of Pakistan told on Friday (February 3) that it currently has only $ 3.09 billion in foreign exchange reserves left. Foreign exchange reserves of $ 5.65 billion are with commercial banks. Accordingly, Pakistan’s total foreign exchange reserves are left at $8.74 billion.

Pakistan’s work of getting goods from abroad with so much foreign exchange can go on for only three weeks. To avoid bankruptcy, Pakistan’s last hope is from the International Monetary Fund (IMF). IMF has not yet released loan installment to Pakistan. He has imposed some conditions regarding tax collection, on which the Government of Pakistan has to take a decision. After this, Pakistan can get loan from IMF. After all, why does IMF give loan to countries like Pakistan which are facing economic crisis, let us know.

What is IMF?

IMF is a major financial agency of the United Nations, in this sense it has the status of an international financial agency. Its headquarter is in Washington DC. The establishment of this institution was started in 1944 during the last days of the Second World War. Then there was a conference called ‘Bretton Woods’ in America, in which 44 countries participated. America, Soviet Union and Britain were involved in these. The IMF formally came into existence on 27 December 1945, a few days after the end of World War II, with 29 member countries. At present the number of its member countries is 190. Kristalina Georgieva, who belongs to Bulgaria, is its Managing Director since 2019. Currently, the IMF has an amount of about one trillion dollars, which can be used to give loans to member countries.

Why does IMF give loans?

At the time of its establishment, the agency’s objective was to bring the global economy back on track, strengthen the exchange rate system and boost the economy of war-affected European countries. Even now there is not much difference in its objectives. If understood in simple words, IMF provides loans to its member countries at cheap rates. It provides free loans to countries with very poor category. The aim is that the concerned country recovers from the economic crisis because the economy of all countries is counted in the global economy.

What conditions does the IMF impose for the loan?

IMF gives loan but for that countries have to follow some of its conditions. Make it clear that IMF does not give loans to the government of any country for any particular project. To overcome the crisis of the economy, the conditions that the IMF imposes while issuing loans include reducing the debt given by the government in the concerned country, reducing corporate tax and opening the country’s economy for foreign capital investment, etc. Are.

Pakistan is facing one such condition, IMF has placed a condition related to tax collection from it. With a view to helping countries recover from economic crisis, the IMF works at several levels, including providing policy advice to stabilize countries. Along with this, it also tracks economic matters.

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